German industrial output posted a muted rise in November but easing demand is likely to dampen a recovery in production in the coming months, an Economy Ministry report showed today.
The seasonally adjusted month-on-month rise of 0.7 per cent compared with the mid-range forecast in a Reuters poll of 30 economists for output to rise by 1.0 per cent.
"It will be a sluggish recovery," said BHF Bank economist Gerd Hassel, arguing that the economy had expanded by around 0.4 per cent in the final quarter of 2009.
Germany pulled out of its deepest post-war recession in the second quarter of 2009, when the economy grew by 0.4 per cent, and the expansion gained pace over the following three months, posting a 0.7 per cent increase on the quarter.
Germany is heavily dependent on exports for growth and manufacturing orders data yesterday gave a jolt to the economic outlook for 2010, showing a gain of just 0.2 per cent on the month as weak foreign demand sapped new business.
Friday's preliminary Economy Ministry data showed October's output figure was revised up to show a decline of 1.7 per cent compared to a 1.8 per cent fall previously reported. The fall in October followed a series of strong gains in output.
"It will be hard to match the growth rates of industrial production in recent months," said Carsten Brzeski, economist at ING Financial Markets.
"These were due to the initial rebound. Now the industrial sector is entering a period of more normal growth rates."
The ministry said the recovery trend in output was intact but added: "The upwards momentum is, however, likely toweaken given that incoming industrial orders have been muted lately."
A breakdown of the production data showed output of capital goods rose by just 0.3 per cent on the month in November after a 4.2 per cent fall in October.
"Production of capital goods is weak, meaning the prospects for a self-sustained recovery remain slight. Due to massive global over-capacity, it will likely take a while until demand for capital goods rises again," said Joerg Lueschow at WestLB.
"Hence, I share the expectation that we must prepare for a moderate development in exports," he said. "Economic output will not increase in 2010 as strongly as in the second half of 2009."
German firms like industrial group Siemens have a strong reputation for producing capital goods to a high quality.
Siemens' chief executive said last month it would take some time before the global economy returns to pre-crisis levels, citing Dubai's debt problems as a sign that the financial crisis is far from over.
"The recent developments in Dubai demonstrate that the global crisis in the real estate and financial markets is far from over, and that the situation remains unstable," CEO Peter Loescher told reporters.
Earlier today, economists said German export growth was likely to ease in coming months as governments withdraw fiscal stimulus.
The government has forecast the economy to grow by 1.2 per cent this year, though finance minister Wolfgang Schaeuble last month described the projection as "very cautious".
Reuters